BBVA and Zapata Release Study Showing the Potential to Speed Up Monte Carlo Calculations for Credit Valuation Adjustments with Quantum Computing

(StreetInsider) Zapata Computing recently announced the results of a research project conducted with the global bank BBVA. The project’s aim was to identify challenges and opportunities for quantum algorithms to speed up Monte Carlo simulations in finance. Monte Carlo simulations are commonly used for credit valuation adjustment (CVA) and derivative pricing. The research proposes novel circuit designs that significantly reduce the resources needed to gain a practical quantum advantage in derivative calculations, taking years off the projected timeline for the day when financial institutions can generate real value from quantum computers.
“Our innovative approach to quantum-accelerated Monte Carlo methods uses a novel form of amplitude estimation, combined with additional improvements that make the quantum circuit much shallower, in some cases hundreds of times shallower than the well-known alternatives in the literature,” said Yudong Cao, CTO and founder of Zapata Computing. “This approach reduces the time needed for a quantum computer to complete the CVA calculation by orders of magnitude, and also dramatically reduces the number of qubits needed to gain a quantum advantage over classical methods.” Zapata highlights that, in their enterprise customer collaborations, they perform in-depth studies of how much quantum computing resource will be required to obtain practical benefit for business operations. This type of in-depth research can directly inform the hardware specifications needed for quantum advantage in specific use cases.
“Improving the performance of these calculations in realistic settings will have a direct impact on the technological resources and costs required for financial risk management,” said Andrea Cadarso, BBVA Mexico’s Team Lead for Quantitative & Business Solutions. “The implications of this research are not limited to CVA calculations. We intend to extend our approach to other applications in quantitative finance, where Monte Carlo simulations are widely used for everything from policy making and risk assessment to financial product pricing calculations.”
The BBVA-Zapata Computing joint publication is the result of one in a series of research initiatives that BBVA Research & Patents launched in 2019. These projects, conducted in partnership with leading institutions and companies including Spanish National Research Council, Multiverse, Fujitsu and Accenture, explore the potential advantages of applying quantum computing in the financial sector.